Revenue Metrics
ARR vs MRR: Annual vs Monthly Recurring Revenue
Same recurring revenue, different time bases. MRR is the monthly operating heartbeat; ARR is the annualized run rate boards and investors use.
Quick Answer
MRR (Monthly Recurring Revenue) is predictable subscription revenue each month. Basic formula: Active Customers × ARPU (or the sum of all active subscription amounts).
ARR (Annual Recurring Revenue) is that run rate annualized: ARR = MRR × 12. Example: $40,000 MRR = $480,000 ARR.
Neither is the same as total GAAP revenue. For that distinction, see ARR vs Revenue.
Side-by-side comparison
| Dimension | MRR | ARR |
|---|---|---|
| Time base | Monthly | Annualized (usually ×12) |
| Primary audience | Ops, growth, finance monthly reviews | Investors, board, fundraising |
| Growth reporting | Month-over-month | Year-over-year / run-rate |
| Granularity | Higher (new, expansion, churned MRR) | Often summarized at company level |
| Conversion | Base | MRR × 12 |
Formulas
MRR = Active Customers × ARPU
ARR = MRR × 12
Many teams also track an MRR bridge: Starting MRR + New + Expansion − Churn − Contraction = Ending MRR. Annualize ending MRR for ARR run rate.
When to use each
Use MRR when: reviewing weekly/monthly growth, diagnosing churn, modeling expansion, or planning capacity.
Use ARR when: sizing the company for investors, comparing YoY scale, or quoting “we are a $XM ARR business.”
Common mistakes
- Including one-time professional services in MRR/ARR
- Reporting MoM growth on ARR without converting (divide ARR by 12 first, or use YoY ARR)
- Treating ARR as cash collected this year (billing terms differ)
- Confusing ARR with total revenue (see ARR vs Revenue)
Related metrics
Pair recurring revenue with NRR / NDR for retention quality, and with LTV and CAC for unit economics.
Sources
Definitions follow standard SaaS practice. See our disclaimer.
Frequently Asked Questions
What is the difference between ARR and MRR?
MRR is Monthly Recurring Revenue. ARR is Annual Recurring Revenue, typically MRR × 12. MRR is used for monthly operations; ARR is the investor and board scale metric.
How do you convert MRR to ARR?
ARR = MRR × 12. Example: $50,000 MRR = $600,000 ARR. Keep definitions consistent (what counts as recurring).
Is ARR the same as annual revenue?
No. ARR is recurring subscription run rate. Total or GAAP revenue can include one-time fees, professional services, and other non-recurring items. See ARR vs Revenue for that distinction.
Should I report growth in MRR or ARR?
Use MoM MRR growth for operating cadence. Use YoY ARR growth for board and investor reporting. Do not mix a monthly growth rate with an annual base without converting.